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Mediating Family Business Disputes

The frequency of intra-family business disputes should not surprise me. Nevertheless, time and again, brothers and sisters, parents and children, and other relatives of various degrees of kinship find ways to create and perpetuate disputes which require mediation. I am reminded at times of the cartoon showing a couple of people seated in a vast auditorium of otherwise empty chairs and the caption reads: “Conference of Children of Functional Families”. My introduction to these kinds of disputes came early in my career as a trial lawyer. Two brothers were fighting over compensation for ownership of shopping centers. The case made it through two trials and an appeal to the our state's highest court. The contrast of the parties’ educations, attitudes, and personalities perhaps made conflict both inevitable and perpetual. The existence of large, valuable assets provided the forum for the lifelong animosity to play out.

In my mediation practice, both the economic and relationship issues appear as well. At mediation, I attempt to address the relationship issue first for two reasons. First, because it is not uncommonly the real driver of the whole dispute. The typical dispute follows the death of a strong family figure who had successfully kept the warring relatives at bay during his or her lifetime. The dispute itself may be about the estate left behind, or a business which the deceased family member created and had a controlling share. Those left behind had plenty of rivalries over the years but were not allowed to let them bubble to the surface. As above, the litigation over the assets provides the forum for the rivalries to play out. The second reason I address the relationship issue up front is because I am not, nor do I pretend to be, a family counselor. This is an important limitation which I bluntly set out in the first session with the group. I tell them directly that, regardless of whether their dispute has roots in long-remembered or long-forgotten slights, it is not my job to resolve those issues. The issue of “Mommy always loved you best” may be the reason they are at loggerheads, but it is not something which I am prepared or intending to resolve. This is sometimes a disappointment to the relatives who feel that they have been treated poorly over the years. But both my professional limitations and the scope of services for which I have been retained militate against my attempting to wander into the family history minefield.

Of interest, and perhaps because of the relational root of many of these disputes, many times the parties are unprepared for successful mediation on the merits. They come in knowing that they want to resolve their dispute about hotels, or shopping centers, or real estate, or other corporate assets or entities, but frequently have never focused on the economic value of those assets. Preparation before the mediation session requires all parties to understand values in a marketplace, not just in sentimentality. The mediation is most successful when all parties, guided by helpful attorneys and other professionals, know what assets are at stake and know the range of their fair market values. The mediator’s job is to successfully lead the parties to understand that the mediation process is aimed at an economic, not relational, realignment. And then to get them to negotiate as business people, not relatives.

Now, having said all the above, I do have a confession. As I certainly always want family harmony ultimately to reign supreme, I do take the lawyers aside at the beginning for a little detour. Put in its bluntest form, I ask the attorneys what they see as the likely future for these family members. Is this a family who at the other’s death will spit on their graves or is this a family with a prospect of joining hands and singing Kumbaya? Granted, there is a lot of space in between those extremes. Nonetheless, the lawyers’ perception of their clients’ relational prospects helps me determine the tone of my interactions and whether it is likely that family members are willing to trade emotional compensation for economic compensation. By this I mean the dynamic which we as lawyers have seen on occasion where, because of the prospect of an ongoing relationship with the opposing party, our client does not push to receive all he or she is entitled to. “Leaving something on the table” can be a conscious strategy to pave the way for future acts of good will and collaboration. This is a position certainly seen when two feuding businesses realize that their relationship will or must continue after the dispute at hand is resolved. It applies even more strongly in family business disputes when future holiday dinners, birthdays, anniversaries provide continual reminders that there are opportunities for family interactions. Some family business disputes have this element and it will be actively traded on in the mediation sessions. Others do not. These then need to be mediated, if animosity can be put aside, in a straightforward business-like way.

The mediation of family business disputes is therefore unique in the historical relationships and the prospect for future interactions which are absent in many other disputes. The mediator needs to understand this context, and use his best judgment to either bypass it or incorporate it into the bargaining field.